Another week, another record-setting SPAC merger, as Lionheart Acquisition II (NASDAQ:LCAP) and MSP Recovery announced a deal that will bring the Medicare specialty firm public. The combined company is expected to have a value of $32.6 billion. LCAP stock popped nearly 9% in Monday’s pre-market, before falling back to near 1.1% by 8:30 a.m. Eastern.
The special purpose acquisition company merger, which would be the second-biggest ever, is expected to be completed in the fourth quarter of 2021. The current deal size puts it just behind the $40 billion Grab Holdings-Altimeter Growth (NASDAQ:AGC) merger.
MSP Recovery is expected to list on the Nasdaq under the ticker MSPR. The company specializes in Medicare Secondary Payer recovery rights, pursuing improperly paid claims against primary payers and responsible parties.
MSP is currently pursuing the more than $50 billion it owns in billed amounts against insurance companies that have primary payment responsibility as well as medical and pharmaceutical manufacturers that either caused the expenditure of medical treatment or inflated their prices against the law, according to the tie-up announcement. MSP’s $50 billion in billed amounts is projected to grow to $263 billion.
The Centers for Medicare & Medicaid Services reviews less than two-tenths of a percent of the more than 1 billion claims Medicare receives a year.
“MSP identified fragmented data infrastructure both in the insurance and healthcare industries and developed a revolutionary solution: a pioneering data analytics platform that efficiently identifies and uncovers historical waste, helps to support the long-term sustainability of Medicare and Medicaid programs, and recovers monies owed to hospitals, health insurance companies and medical providers,” said Lionheart CEO Ophir Sternberg.
LCAP Stock No Longer Among Searching SPACs
The Lionheart-MSP deal comes as more than 420 SPACs are now searching for a private company to take public and another 295 with pending IPOs, Bloomberg reported yesterday.
SPAC issuance fell in dollar terms during the second quarter as the average SPAC initial public offering size shrank, according to a Barclays research report. Offerings in Q2 were around $215 million, down 35% from the previous quarter’s average.
Meanwhile, a recent European Corporate Governance Institute (EGCI) working paper cast doubt over whether SPACs are living up to the promise of being a cheaper, more efficient and more democratic way to bring new companies public, The Financial Times reported.
The SPACs in the study issued shares for roughly $10 a piece — as Lionheart did — and investors valued them at that same amount at the time of merger, but the median SPAC in the study was holding cash of only $6.67 per share, meaning these shell vehicles effectively consumed one-third of the cash they raised, or 50% of the money they eventually delivered to the companies they brought public, according to the report.
The Securities and Exchange Commission is already expressing concerns about blank-check companies. Given that the vehicles are structured to leave investors rather than sponsors holding most of the risk, they appear to be a perfect target for regulators looking to limit the assets.
On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, including previous stints with Bloomberg News and as a buyside equity research editor. His Substack newsletter, TLV Strategist, covers the Israel business scene.